Rainbows and Unicorns: The Dream Unlimited Corp. (TSE:DRM) Analyst Just Became A Lot More Optimistic

Dream Unlimited Corp. (TSE:DRM) shareholders will have a reason to smile today, with the covering analyst making substantial upgrades to this year's forecasts. The consensus statutory numbers for both revenue and earnings per share (EPS) increased, with their view clearly much more bullish on the company's business prospects. Dream Unlimited has also found favour with investors, with the stock up a notable 16% to CA$47.15 over the past week. It will be interesting to see if today's upgrade is enough to propel the stock even higher.

Following the latest upgrade, the current consensus, from the solo analyst covering Dream Unlimited, is for revenues of CA$306m in 2022, which would reflect a noticeable 6.0% reduction in Dream Unlimited's sales over the past 12 months. Statutory earnings per share are anticipated to dive 29% to CA$1.83 in the same period. Previously, the analyst had been modelling revenues of CA$275m and earnings per share (EPS) of CA$1.45 in 2022. There has definitely been an improvement in perception recently, with the analyst substantially increasing both their earnings and revenue estimates.

Check out our latest analysis for Dream Unlimited

It will come as no surprise to learn that the analyst has increased their price target for Dream Unlimited 27% to CA$54.33 on the back of these upgrades. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Dream Unlimited, with the most bullish analyst valuing it at CA$56.00 and the most bearish at CA$52.00 per share. Still, with such a tight range of estimates, it suggests the analyst has a pretty good idea of what they think the company is worth.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with a forecast 6.0% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 4.2% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 9.1% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Dream Unlimited is expected to lag the wider industry.

The Bottom Line

The biggest takeaway for us from these new estimates is that the analyst upgraded their earnings per share estimates, with improved earnings power expected for this year. Pleasantly, the analyst also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow slower than the wider market. With a serious upgrade to expectations and a rising price target, it might be time to take another look at Dream Unlimited.

The covering analyst is clearly in love with Dream Unlimited at the moment, but before diving in - you should be aware that we've identified some warning flags with the business, such as recent substantial insider selling. You can learn more, and discover the 2 other concerns we've identified, for free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.